SaaS on the Frontline

IT247.com is a great example of a company that is an ideal candidate for the SaaS model. It’s a rapidly growing online B2B reseller of computers, hardware, accessories and components. Started as a greenfield site with no legacy applications or on-premise architecture, it needed to get up and running quickly – and it had to manage ambitious growth plans as sales ramped up to £1 million per month from monthly orders of 4,000. When the company launched in 2005, it had an online test catalogue of only 100 products but ambitiously planed to have 50,000 items within the year. The company initially considered an on-premises option as well as on-demand, that it could use with Navision, but quickly realised that the challenge of integrating disparate systems would distract from core business needs. Instead, it opted for NetSuite, which claimed to provide an on-demand system that offered CRM, ERP and ecommerce functionality in one integrated offering.

“We started with a blank piece of paper. Which was fantastic for us since we nothing to integrate,” says Steve Willock, managing director at IT247.com. “We have been really lucky because we’re not managing a huge change. We’re not taking antiquated systems from a museum, and then attempting to integrate them with an on-demand vendor.

“We considered a whole host of things and decided on the whole networked solution, not just the CRM.

“We developed a proprietary application for our supply chain management but we didn’t want to buy four or five separate applications to run the business, so we looked at mediation, financials and logistics, and we looked at CRM products including Salesforce.com. We additionally looked at a non-hosted system and some marketing applications.

“We considered a whole host of things and decided on the whole networked solution, not just the CRM. Cost was certainly one consideration but the reality is that costs increase,” admits Willock. “I think that when we first looked at the NetSuite model, because we were creating a retail business from scratch, it was a low cost of entry. The cost was an attractive element, but there were other factors to consider. “From our perspective as a SME setting up in the ecommerce environment, the extremely secure levels of the servers, the level three hosting that NetSuite has, was a real plus. We could actually buy into a level of security that it would have taken us months and thousands of pounds to build ourselves, and we could switch it on almost instantaneously. That was a positive thing. You lose a bit of control but you gain security that you wouldn’t normally have.”

So, from our point of view the integration piece was then a relatively simple decision and easy ride,” he says. After implementing NetSuite, IT247.com then began experiencing rapid growth in sales, with its successes averaging 40 per cent month on month from April 2006. Sales are now reported in excess of £1m per month. Another appeal of NetSuite was its ability to generate business dashboards that could provide up-to-themoment information on business activities. This enabled company executives to monitor all aspects of their business, from marketing campaigns and website activity all the way to inventory and fulfilment. “If the company uses the system in the manner that it is designed to be used it will deliver real commercial benefits to the business and it will deliver real time management information to the board,” says Willock. “Everybody, regardless of where they live within the organisation, whether they are a telesales person, a customer services, the CFO, MD or CEO, they can customise the dashboard view that they have of the business. It reports everything that’s going on in that business in real time, any time you are in the world. “If the user uses the system in the manner in which it is designed to be used it will deliver real commercial benefits to the business...”

IT247.com

“By using NetSuite’s SuiteFlex platform, IT247.com can perform a large number of business process customisations and integration as well as also then integrating with proprietary price management, supply chain management and catalogue merchandising systems. That said, customisation remains limited.

“We have the development sand box and we were one of the first in the UK to deploy it. We do some wonderful things on it but we can’t touch anything too deep,” says Willock. “NetSuite gives you a finished system and there’s not a great deal you can do in the middle, unless you really break it down. We’ve actually gone into that process more deeply than most.”

“ I would project out, not just from a business point of view but from a technology point of view, where this business is going to be in one, two or three years time. If you know your own technology road map then you understand your business dependence on your SaaS supplier. If the correlation is only one very high transactional web services usage where the SaaS vendor is charging you on a web services transaction basis, then you had better calculate that into the cost model. That’s where it all goes out of shape. So understand the total costs from day one, understand the technology that you are likely to need in your timeframe and make sure the two things remain parallel. If at some point in the future they diverge, then you are in trouble,” says Willock.

“On the train recently, I plugged in the data card and saw the sales for the day. I saw how many opportunities we had left to close and how many new leads had been generated on the day. I could see exactly how we performed against the previous day and how we were doing compared to last month. Everything is measured,” he adds. But there are dangers attached to the ‘vanilla’ on-demand approach. “In the case of NetSuite, when we sat down on day one of the project, they said to us, ‘yes, you will be able to do these things with version 11 in April 2006.’ By September 2006, we still hadn’t got everything,” explains Willock. “We did actually get the added functionality around November. That is an example of losing control and having to wait for suppliers to deliver the things that they promise to deliver. Actually, we lost six months worth of functionality. “How much damage did that do to the business commercially during that period of time? Probably not a huge amount but if it happened again today, it would be a disaster,” he says. So was it a good idea to go on-demand and would Willock do it again? “The answer is yes, but the decision driver would be a different one,” he admits. “I was seduced by costs and certainly wouldn’t be seduced by costs in this model again. “That all sounds very negative. Would I do it again? Yes, because I think the alternative would have been at least another 12 months before we got into the market and probably at least another million quid,” Willock concludes.